NAR: Increased Lending, Short Sales Will Reduce REOs
Improving access to affordable mortgage financing for qualified home buyers and investors and committing additional resources to loan modifications and short sales will help reduce current and future inventories of real estate owned (REO) properties held by government agencies, according to the National Association of REALTORS®.
In a letter sent today to the U.S. Department of Housing and Urban Development, the Federal Housing Finance Agency, and the U.S. Department of the Treasury, NAR responded to the agencies’ recent request for input and offered its recommendations for selling REO properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration.
In its letter, NAR urged the agencies to create an advisory board as they explore new options for selling foreclosed properties to ensure that efficiently disposing of agency REO properties will minimize taxpayer losses and reduce the negative effects that distressed properties have on local real estate markets.
“As the leading advocate for housing issues, REALTORS®know that foreclosures affect families, communities, the housing market and our nation’s economy,” said NAR President Ron Phipps. “We believe the government has an opportunity to minimize the impact of distressed properties on local markets by expanding financing opportunities, bolstering loan modifications and short sales efforts, and enhancing the efficient disposition of REO properties. This will help stabilize home prices and neighborhoods and help support the broader economic recovery.”
Phipps said that the lack of available and affordable mortgage financing is hurting REO sales and the entire housing market, and urged increased consumer and investor lending. While NAR supports strong underwriting standards, the lack of private capital in the mortgage market, unduly tight underwriting standards, and increasing fees have discouraged many potential home buyers from applying for mortgages. NAR believes ensuring mortgage availability for qualified home buyers and investors will help absorb the excess REO inventory.
To prevent further REO inventory increases, NAR also recommended that the agencies take more aggressive steps to modify loans and, when a family is absolutely unable keep their home, to quickly approve reasonable short sale offers that allow families to avoid foreclosure. Phipps said that while federal programs have been put into place to help keep families in their homes, many of these have fallen short of expectations, and advocated that those resources be applied toward modifying loans and expediting short sales, which are typically less costly than foreclosure.
“Loan modifications keep families in their home and reduce defaults, while short sales keep homes occupied, helping stabilize neighborhoods and home values,” Phipps said. “Expanding resources and ensuring the use of already allocated funds for pre-foreclosure efforts is the best opportunity to reduce taxpayer costs and creates more positive outcomes for homeowners and their communities.”
NAR’s letter also outlined concerns about proposals to pool large volumes of REO properties for bulk sales. While these types of transactions may help quickly alleviate high REO inventories, taxpayers would be required to accept larger losses than are necessary. Phipps said that efforts should be made to incentivize individual versus bulk sales, except in small geographic areas that meet certain criteria, since selling in bulk to large national investors puts a large section of the housing market into the hands of fewer market participants and puts individual home buyers and sellers at a disadvantage.
He also said the success of any bulk sale programs should be determined by the stabilizing effect the program has on a locale and whether it maximizes value to taxpayers. Maximizing the recovery on the agencies’ assets will depend on how property valuations are determined and that those valuations are accurate, appropriate, and reflective of market conditions, such as the valuations available through the Realtors Property Resource™, an NAR subsidiary.
NAR is also concerned about proposals that include lease-to-own elements. Phipps said that agency policies should first be focused on keeping families in their homes through loan modifications or short sales if that’s a better option, and that the agencies should not expedite foreclosures so that those properties could be included in a lease-to-own program. He added that any lease-to-own programs should not be administered by the government, but instead should include the participation of local investors or nonprofits that can manage the specialized needs and challenges of the local market.
“REALTORS® welcome the agencies’ desire to receive input and ideas to help address their REO inventory. We look forward to serving on any advisory board and working together with agency staff, real estate professionals, property managers, and others with extensive real estate industry experience to develop sound strategies and solutions to ongoing REO issues,” said Phipps.
Source: NAR
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NAR Backs Comprehensive GSE Reform
The National Association of REALTORS® supports comprehensive reform of America’s housing finance market that protects taxpayers and ensures the availability of affordable mortgage credit today and into the future.
“As the leading advocate for home ownership and housing issues, NAR believes that a methodical, measured and comprehensive approach for reforming the secondary mortgage market is in the best interest of home buyers and taxpayers,” said NAR President Ron Phipps. “A comprehensive and effective mortgage reform strategy is critical to help keep a level of certainty in the marketplace and not further disrupting the still fragile housing market recovery.”
NAR supports the objectives of H.R. 1859, the “Housing Finance Reform Act of 2011,” introduced last month by Reps. John Campbell (R-Calif.) and Gary Peters (D-Mich.). The bill takes a comprehensive approach for reforming the government-sponsored enterprises Fannie Mae and Freddie Mac.
“While NAR has concerns with some aspects of the legislation, we strongly support the bill’s comprehensive approach to reforming the secondary mortgage market and greatly appreciate the efforts of Reps. Campbell and Peters to protect the affordable 30-year fixed rate mortgage, shield taxpayers from unnecessary additional bailouts, and ensure the availability of mortgage capital to all markets under all economic conditions,” Phipps said.
NAR opposes the piecemeal approach of recent proposals that would quickly constrain or shut down existing secondary mortgage market facilities before identifying a viable replacement that would allow securitization to function under all market conditions.
“We believe that a fully private system is not a viable or sustainable alternative to the existing housing finance system and will severely restrict mortgage capital, raise costs for qualified, creditworthy home buyers, and place taxpayers at greater risk as too-big-to-fail government-backed financial institutions dominate the market,” Phipps said. “NAR looks forward to working closely with Congress; the time has come to have a serious discussion about comprehensive reform of our nation’s housing finance system.”
—NAR
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NAR Opposes High Down Payment Requirement
High down payment requirements being proposed by federal regulatory agencies as part of the upcoming rule-making under the Dodd-Frank Wall Street Reform and Consumer Protection Act will unnecessarily burden home buyers and significantly impede the economic and housing recovery, according to the National Association of REALTORS®.
Six agencies (including the Department of Housing and Urban Development, Federal Deposit Insurance Corp., Federal Housing Finance Agency, Federal Reserve, Office of the Comptroller of the Currency, and the U.S. Securities and Exchange Commission) are developing a proposed risk retention regulation under the Dodd-Frank Act that requires lenders that securitize mortgage loans to retain 5 percent of the credit risk unless the mortgage is a qualified residential mortgage (QRM); FHA and VA mortgages would also be exempted. The purpose is to create strong incentives for responsible lending and borrowing.
“As the leading advocate for home ownership, NAR supports a reasonable and affordable cash investment requirement coupled with quality credit standards, strong documentation and sound underwriting,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I. “A narrow definition of QRM, with an unnecessarily high down payment requirement, will increase the cost and reduce the availability of mortgage credit, significantly delaying a housing recovery.”
NAR believes that Congress intended to create a broad QRM exemption from the 5 percent risk retention requirement to include a wide variety of traditionally safe, well-underwritten products. Congress chose not to include a high down payment among the criteria it specified in the Dodd-Frank Act to guide the regulators in defining a QRM. Strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk.
“We need to strike a balance between reducing investor risk and providing affordable mortgage credit. Better underwriting and credit quality standards have greatly reduced risk. Adding unnecessarily high minimum down payment requirements will only exclude hundreds of thousands of buyers from home ownership, despite their creditworthiness and proven ability to afford the monthly payment, because of the dramatic increase in the wealth required to purchase a home,” said Phipps.
The definition of QRM is important because it will determine the types of mortgages that will generally be available to borrowers in the future. Borrowers with less than 20 percent down could be forced to pay higher fees and interest rates, up to 3 percentage points more, for safe loans that otherwise do not meet too narrow QRM criteria.
NAR is concerned that a narrowly defined QRM will also require severe tightening of FHA eligibility requirements and higher FHA premiums to prevent huge increases in its already robust share of the market, adding additional roadblocks to sustainable home ownership.
“Saving the necessary down payment has always been the principal obstacle to buyers seeking to purchase their first home. Proposals requiring high down payments will only drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market,” said Phipps. “We strongly urge the regulators to consider the negative consequences of setting onerous limits on the availability of credit.”
Source: NAR
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NAR Issues Call to Action to Uphold MID
The National Association of REALTORS® is encouraging its members to reach out to Congress to persuade them to cosponsor H.R. 25, a bipartisan House resolution offered by Rep. Gary Miller (R-Calif.) that affirms the value and importance of the mortgage interest deduction. The association issued a call to action this morning to help REALTORS® send a message to their representatives on this issue.
“We know in Congress that there’s a lot of questioning of whether home ownership matters,” 2011 NAR President Ron Phipps said in a video promoting the effort. “We really need to remind Congress that the mortgage interest deduction is a critical element of … the experience of home ownership.”
As currently constructed, this bill expresses the sense of Congress that the current law governing the MID must be retained, and argues that restricting the current law in any way would undermine progress in the still-fragile housing recovery.
Source: NAR
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NAR Urges Flood Insurance Reform
Congress needs to act quickly to reauthorize and strengthen the National Flood Insurance Program for the long-term to prevent undermining the fragile real estate market, the NATIONAL ASSOCIATION OF REALTORS® testified Wednesday to the Senate Committee on Banking, Housing and Urban Affairs .
The NFIP authority is set to expire on September 30 for the ninth time in the past two years; Congress has approved eight short-term extensions during this time.
“We are pleased that last night the Senate passed S. 3814 to extend the NFIP for one year until Sept. 30, 2011. We urge the House to immediately do the same,” says REALTOR® Nick D’Ambrosia, who testified on NAR’s behalf.
“However, this month-to-month approach has hindered recovering real estate markets and exacerbated the uncertainty for the more than 5.5 million taxpayers who depend on the NFIP to protect them against floods,” says D’Ambrosia, vice president of training and recruiting for Long and Foster Companies and vice chair of the Maryland Real Estate Commission.
The House has already passed H.R. 5114, the Flood Insurance Reform Priorities Act, which would reauthorize the NFIP for a full five years. The Senate is holding this hearing to begin the process of developing the Senate response to the House reform bill.
As part of long-term reauthorization reforms, NAR supports strengthening the NFIP’s solvency through outreach and education programs that would help raise participation beyond the current 50 percent of home owners in federally designated flood areas. The increase in participants would boost funding for the NFIP, help property owners recover from flood losses and decrease future federal assistance when uninsured properties flood and suffer loss, NAR said.
Adding types of coverage for living expenses, business interruption and replacement cost of contents and updating coverage limits – which haven’t been adjusted since 1994 –would also help increase participation.
NAR also strongly supports extending and fully funding the pilot program to mitigate properties that have repeatedly suffered insured flood losses.
“NAR urges the Senate to consider H.R. 5114 and work to strike a proper balance between the NFIP’s fiscal stability and housing affordability,” D’Ambrosia said.
— NAR
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NAR Advocates for Attainable Homeownership
Attainable and sustainable homeownership should be the goal for restructuring the secondary mortgage market, said National Association of REALTORS® President Vicki Cox Golder Monday at a Regional Conference on Housing Finance Reform. The conference, held in Cleveland, was sponsored by the administration and focused on the future of the nation’s housing finance system.
“REALTORS® support strengthening the soundness and financial safety of the mortgage market so there are safe, flexible, and affordable options to meet borrowers’ needs,” said Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “While fixing the mortgage finance system is critical, it’s just half the challenge. We also need to continue to support policies that advance and sustain homeownership, which helps people build wealth over the long term.”
At the conference Golder was joined by other industry and government officials, including Federal Housing Administration Commissioner Dave Stevens, Assistant Secretary for Financial Institutions Michael Barr, Under Secretary of Treasury for Domestic Finance Jeffrey Goldstein and Deputy Director of the National Economic Council Dianna Farrell.
One of NAR’s recommendations is to reform FHA, which is bearing the brunt of the market share right now. “While some reforms have taken place, more needs to be done to strengthen its soundness and financial safety and protect taxpayers. Congress is working on legislation that would help FHA operate more effectively and reduce risk, and that legislation needs to be passed this session,” said Golder.
NAR further recommends restructuring Fannie Mae and Freddie Mac from their current private-profit and public-loss structure into government-chartered, non-shareholder owned authorities. This will make the entities subject to tighter regulations on product, profitability, and minimal retained portfolio practices in a way that ensures they accomplish their mission and protect taxpayer monies.
“While we work to shore up this important aspect of the finance system, we also need to encourage the private market to step up and do their part to address current problem. Specifically, we need lenders to do a much better job of restructuring loans, approving reasonable short sales, helping people avoid foreclosure, and ensuring that standards are not overly stringent,” said Golder.
Source: NAR
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Surge in Pending Home Sales Continues
Pending home sales have risen for three consecutive months, reflecting the broad impact of the home buyer tax credit and favorable housing affordability conditions, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Pending Home Sales Index, a forward-looking indicator, rose 6.0 percent to 110.9 based on contracts signed in April, from an upwardly revised 104.6 in March, and is 22.4 percent higher than April 2009 when it was 90.6. That follows gains of 7.1 percent in March and 8.3 percent in February.
Pending home sales are at the highest level since last October when the index reached 112.4 and first-time buyers were rushing to beat the initial deadline for the tax credit. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, said this second round of surging sales from the tax credit extension looks as strong as the original tax credit. “There were concerns that only a small pool of buyers were left to take advantage of the tax credit extension. But evidently the tax stimulus, combined with improved consumer confidence and low mortgage interest rates, are contributing to surging sales,” he said. “The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs.”
NAR expects a net of 1 million additional jobs in the second half of this year and about 2 million in 2011.
“The home buyer tax credit brought close to 1 million additional buyers into the market, which is now helping the trade-up market and has significantly improved the inventory situation. This stabilized home prices more quickly and has preserved about $900 billion in home equity; in turn, that is keeping additional households from going underwater and risking foreclosure,” Yun said.
Pending Home Sales Index by region:
* Northeast: jumped 29.5 percent to 97.9 in April and is 24.5 percent above a year ago.
* Midwest: rose 4.1 percent to 104.2 and is 17.9 percent above April 2009.
* South: slipped 0.6 percent to an index of 123.9, but is 31.3 percent higher than a year ago.
* West: increased 7.5 percent to 107.9 and is 12.0 percent higher than April 2009.
“A big concern surfacing recently is insufficient time to close the deal at the settlement table. Under normal circumstances, two months would be enough time from contract signing to settlement date,” Yun said. “However, the recent housing cycle has brought long delays related to the short sales approval process by banks, and from ongoing appraisal issues.”
He added that there could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems meeting the settlement deadline by June 30. Because of these market challenges, NAR has asked Congress to provide flexibility on the deadline for closing.
Source: NAR
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Pending Home Sales Down
Pending home sales are down and additional declines are expected from abnormal weather conditions, according to the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in January, fell 7.6 percent to 90.4 from an upwardly revised 97.8 in December, but remains 12.3 percent higher than January 2009, when it was 80.5.
Lawrence Yun, NAR chief economist, said weather is likely to impact housing data. “January pending sales, though still higher than one year ago, remain much lower than expected given that a large number of potential buyers are eligible for the expanded home buyer tax credit. Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February,” he said.
As such, abnormal swings are expected in housing data. “We will see weak near-term sales followed by a likely surge of existing-home sales in April, May, and June,” Yun said. “The real question is what happens in the second half of the year. If there is sufficient job creation, housing can become self-sustaining with stable to modestly rising home prices because inventory has been trending downward.”
Here’s a look at pending home sales numbers by region:
• Northeast: Pending home sales fell 8.7 percent to 71.3 in January, but are 20.5 percent higher than January 2009.
• Midwest: The index dropped 8.9 percent to 81.2 but is 11.8 percent above a year ago.
• South: Pending home sales slipped 2.1 percent to an index of 98.1, but the index is 18.0 percent higher than January 2009.
• West: The index dropped 13.2 percent to 102.9 but is 1.4 percent above a year ago.
— NAR
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Record Streak Continues for Pending Home Sales
Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August, rose 6.4 percent to 103.8 from a reading of 97.6 in July, and is 12.4 percent above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5.
Lawrence Yun, NAR chief economist, said not all contracts are turning into closed sales within an expected timeframe. “The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules,” he said. “No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month.”
The Pending Home Sales Index in the Northeast jumped 8.2 percent to 85.3 in August and is 12.0 percent higher than August 2008. In the Midwest the index rose 3.1 percent to 90.8 in August and is 7.6 percent above a year ago. In the South, pending home sales increased 0.8 percent to an index of 104.6 and is 8.2 percent above August 2008. In the West the index surged 16.0 percent to 130.5 and is 22.3 percent above a year ago.
“There is likely to be some double counting over a span of several months because some buyers whose contracts were cancelled have found another home and signed a new contract to buy,” Yun explained. “Perhaps the real question is how many transactions are being delayed in the pipeline, and how many are being cancelled? Without historic precedents, it’s challenging to assess.”
Yun also noted that the data sample coverage for pending sales is smaller than the measurement for closed existing-home sales, so the two series will never match one for one.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said first-time buyers need to act now. “Potential first-time buyers must make a contract offer very soon to have a reasonable chance of qualifying for the tax credit,” he said. “Congress needs to extend and expand this program because it’s stimulating the economy and reducing inventory close to price stabilization points.”
McMillan said a sizable number of homebuyers already in the pipeline could be let down because of the tight deadline. “We know there is a pent-up demand because sales are below normal levels for the size of our population. The faster we absorb excess inventory, the sooner we’ll turn the corner on home prices, prevent additional families from becoming upside-down in their mortgages, and give Wall Street the confidence to extend credit to other sectors,” he said. “Each home sale pumps an additional $63,000 into the economy through related goods and services, so the benefits of extending and expanding the tax credit far outweigh the costs.”
Yun said the forecast for home sales and prices depends very much on whether a tax credit is extended. “All we can say for certain is sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession,” he said. “Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.”
Source: NAR
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NAR Supports Incentives for Green Buildings
In testimony before a House Transportation and Infrastructure Subcommittee, the NATIONAL ASSOCIATION OF REALTORS® reiterated the significance of its green office building. NAR also reinforced its support for energy-efficiency tax credits, block grants, and weatherization assistance investment.
NAR’s office building on Capitol Hill was the first newly constructed, green-certified building in the District of Columbia, demonstrating NAR’s commitment to environmentally sustainable real estate development.
“NAR has taken a number of important steps to raise public awareness about green buildings and their benefits in the marketplace,” said Jim Helsel, NAR treasurer and a REALTOR® from Pennsylvania specializing in commercial real estate. Helsel served as chairman of NAR’s Real Property Operations Committee in 2002-03 that oversaw creation and development of the REALTOR® building that was certified for Leadership in Energy and Environmental Design, and was awarded the Silver LEED rating by the U.S. Green Building Council in 2004 when the building opened. Full story.
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NAR Supports Incentives for Green Buildings
In testimony before a House Transportation and Infrastructure Subcommittee, the NATIONAL ASSOCIATION OF REALTORS® reiterated the significance of its green office building. NAR also reinforced its support for energy-efficiency tax credits, block grants, and weatherization assistance investment. NAR’s office building on Capitol Hill was the first newly constructed, green-certified building in the District of Columbia, [...]
Appraisal issue coming to a head
NAR calls for suspension of rules governing Fannie, Freddie loans
An increasingly common complaint of Realtors — that “lowball” appraisals below agreed-upon sales prices are derailing many home sales — has been taken up by industry trade groups.
The National Association of Realtors and the National Association of Home Builders have both identified issues surrounding appraisals as a factor putting a damper on sales of new and existing homes in May — the first month new rules governing appraisals conducted on loans slated for purchase by Fannie Mae and Freddie Mac took effect. Full Story
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First-time Buyers Drive February Sales.
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Existing-home sales increased in February, reversing losses in January, according to the latest report by the NATIONAL ASSOCIATION OF REALTORS®. However, sales activity remains relatively soft, reflecting additional layoffs and buyers waiting for housing provisions in the economic stimulus package to take effect, according to NAR.
Existing-home sales— including single-family, townhomes, condominiums and co-ops—rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January. Existing-home sales are 4.6 percent below the 4.95 million-unit level in February 2008. Seasonal adjustment factors are more volatile in winter months, but sales rates over the past few months show dampened sales activity, according to NAR.
Lawrence Yun, NAR chief economist, says first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. Full Story.
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